Donchian Channels

Donchian channels were developed by Richard Donchian, a pioneer of mechanical
trend following systems. The two outer bands are plotted as the highest high and
lowest low for a set period, originally 20 days, with the optional middle band
calculated as the average of the two.

Use the 25-Day/350-Day exponential moving average as a trend filter.
Go long only if the 25-Day EMA is above the 350-Day exponential moving
average and go short only where below the 350-Day EMA.

The system also uses ATR
trailing stops with a multiple of 2. Faith, however, demonstrates that
replacing the 10-Day Donchian Channel and ATR stops with a simple time-based
exit, where all trades are exited after 80 days (16 weeks), achieves similar
results — with no stop losses at all.

The upper band is calculated as the highest high for the selected period.

The lower band is calculated as the lowest low for the selected period.

The selected period does not include the day on which the band is plotted
(otherwise the band would never be crossed). For example, the 20-Day
Donchian Channels for today are the highest high and lowest low for the
preceding 20 trading days.